Roche has floated an offer to acquire Genentech, a move which has raised a flurry of questions about the sustainability of the big Pharma business model, Genentech’s future independence, and the value of Genentech. It it worth noting, however, that Roche already bought (and sold) Genentech. Using an excerpt from Building Biotechnology to illustrate, Roche pocketed several billion dollars the last time it bought and sold Genentech over a six-week period in 1999:
So, the question must be asked: Despite Roche’s announced plans to include Genentech as an independent research entity, is this transaction simply based on a weak U.S. dollar and an undervalued Genentech? Might they just flip Genentech again?
Guest content from Christopher Starr:
After years of confusion and neglect, translational research is now becoming institutionalized.
Citing the barriers between the lab and clinic, along with the difficulties and complexities of conducting clinical research, the NIH set up a major program to advance clinical and translational research. The Clinical and Translational Science Awards consortium, or CTSA consortium, was launched in October 2006. Its aims are no less than to “catalyze the development of a new discipline of clinical and translational science.”
The CTSA consortium consists of major academic health institutions, like the Mayo Clinic or John Hopkins University, who are given large grants by the NIH. The grants are used to develop centers for translational and clinical research. These centers set up graduate programs and advance research in a variety of ways, including developing partnerships with industry and other private and public institutions. By 2012, 60 institutions will be “linked together to energize the discipline of clinical and translational science.” The NIH is not skimping on this initiative, as it plans on funding the completed program to the tune of $500 million per year.
Although “translational research” is a varied term, the CTSA will mostly focus on research that is relevant to industry. According to an article by Steven H. Woolf in the Journal of the American Medical Association (JAMA), two major areas have been defined, called T1 and T2. T1 is more applicable to industry, as it involves “the transfer of new understandings of disease mechanisms gained in the laboratory into the development of new methods for diagnosis, therapy, and prevention and their first testing in humans.” T2 involves “the translation of results from clinical studies into everyday clinical practice and health decision making.” The CTSA program seems to mainly focus on T1.
Although the CTSA program is young, there have already been examples that show how partnering with CTSA researchers can benefit pharmaceutical companies. One is the Yale Clinical trial network, which should streamline and improve the clinical trials process for the companies that are part of it. Among other goals, the network will remove barriers to clinical trials and promote trial participation. There is also at least one example of a cross licensing agreement between a CTSA funded researcher and industry. Dr. Daniel Rader, at the University of Pennsylvania, took advantage of his university’s CTSA to develop an MTP inhibitor that was very effective in treating a rare disease called familial hypercholesterolemia. Seeing the potential of lower doses of the drug to treat patients at risk of heart disease, Aegerion Pharmaceuticals is developing the drug for this purpose.
CTSA consortium grants work as individualized cooperative agreements between the NIH and the grantee. This means that each CTSA institution will be organized differently. Individual CTSA’s will have varying degrees of openness to participants from industry. However, the ones that are very open to industry participation present extensive opportunities. One example of an industry-friendly CTSA is the Institute of Clinical and Translational Sciences (ICTS) in St. Louis. According to their website, individuals from companies that collaborate with an ICTS-affiliated academic researcher can register for ICTS membership. Benefits of membership include access to research facilities, access to consulting services, and increased potential for further collaboration with ICTS-affiliated academic researchers.
Further information, including a list of all current CTSA institutions, is available at www.ctsaweb.org.
Guest content from Nicolaj H. Nielsen, managing director of Biostrat.
A case-study on the recent licensing-deal between Myriad and Lundbeck: Information asymmetry, calculated bets and royalties in the biotech industry.
The share-price of Lundbeck has fallen with approximately 10 %, since the Danish pharmaceutical company announced an inlicensing deal with the US biotech company Myriad for a new drug named Flurizan aimed against mild Alzheimer. Why do investors not like the deal, and could the deal be (yet another) good sign for biotech companies?
What we know…
Flurizan has completed phase II and the results from the two ongoing phase III studies will not be known until June 2008. Lundbeck will pay Myriad USD 100 million for the European commercialization rights + milestone payments + royalties in the range of 20-39 % of sales.
Lundbeck has clearly taken a calculated bet. Lundbeck believes so much in Flurizan that the company is willing to pay a large sum of money before the phase III data is known. The company is thereby trying to avoid a bidding-war against Big Pharma after positive phase III data, but is at the same time taking significant financial risk.
Why is the Market so skeptical?
Biotech is maybe the industry with the largest degree of information asymmetry. Biotech companies simply know much more about the strength and weaknesses of a potential product than outside investors/partners. This has been proven again and again by the lack of shareholder value creation in investment funds – even those that are managed by highly specialized investment companies.
The market believes that the information asymmetry is also in play in the Flurizan deal. If data from the ongoing phase III studies are so promising, why is Myriad outlicensing the product before the phase III data is available? Such a decision could of course be explained by a risk-minimizing strategy by Myriad – but again, if Myriad believes so much in the product, why not take the risk and wait 4 weeks for the data to be available?
The other thing that worries the market is the price of the drug. Taking the calculated bet could of course be defended if the acquisition price and royalties are very low. Many investors believe that not only have Lundbeck just spent USD 100 million on the roulette, but even if successful – the product will be very expensive for Lundbeck.
The parties have announced that Lundbeck will pay royalties in the range of 20-39 % of sales, which seems very high com compared to industry standards.
We don’t know the details of the agreement, and are therefore not in a position to judge whether the price is too high or not. We can just conclude that the market has voted with its feet, and the share-price has fallen with close to 10 % since the announcement. The market believes that Lundbeck’s bet is not generating shareholder-value.
Is the Myriad-deal good news for biotech companies in general?
We believe that the Myriad deal is yet another sign that the power between (inlicensing) Pharma companies and (outlicensing) biotech-companies are shifting to the favor of the latter.
In a time where many biotech companies, especially the companies with many early-stage projects, are struggling to get new funding, it is encouraging to see how good terms it is possible to negotiate only with phase II data. Most Pharma companies, like Lundbeck, is struggling to fill out their pipeline. The fight over good potential products is constantly getting tougher and tougher – for the benefit of biotech companies with the “right” products in their pipeline.
About the author:
This analysis was written by Nicolaj H. Nielsen, managing director of Biostrat, which provides management consulting services to the biotech industry.
Reach a targeted audience with BiotechBlog.
Advertising opportunities are available on BiotechBlog. BiotechBlog is syndicated by BlogBurst, which means that posts are syndicated to outlets such as Reuters, Biospace, San Francisco Gate, and dozens of other media outlets, ensuring a large audience for your message.
Flexible ad spots are available to suit your needs, from simple text ads to banners in wide and tall aspect ratios. For more information on ad formats and rates, see the advertising form.
The March 2008 issue of the Journal of Commercial Biotechnology is now available. This issue focuses on biotechnology marketing and was guest-edited by Leyland Pitt and Ian McCarthy. The links below will take you to the abstract of each article:
Volume 14, Issue 3
|Connecting product innovation management and marketing||PDF|
|Leyland Pitt, Ian McCarthy|
Looking for writers for two book projects:
1) Convert a 102 page screenplay into a book. The topic is the development of a biotechnology company. Looking for a creative non-fiction writer who can write a compelling story. The CEO is available for input and is actively interested in developing the book, but has very limited time availability.
2) Interview a biotechnology industry veteran to profile his observations over his 35+ yrs in the industry. This book will likely require extensive contact with the subject, so it would be best if the writer lives in/frequently visits the Los Angeles area.
I’m also looking to produce several other biotechnology business books to complement my existing books. If you’re interested in helping write or edit a book on the business of biotechnology contact me.
If you are seeking a publisher for a book idea of your own, check out the submission guidelines at Logos Press.
Courtesy of DrugPatentWatch.com:
Drug Patent Expirations in July 2008
*Drugs may be covered by multiple patents
|Tradename||Applicant||Generic Name||Patent Number||Patent Expiration|
|CARDIOLITE||Bristol Myers Squibb||technetium tc-99m sestamibi kit||4,988,827||Jul 29, 2008|
|DEPAKOTE||Abbott||divalproex sodium||4,988,731||Jul 29, 2008|
|DEPAKOTE||Abbott||divalproex sodium||5,212,326||Jul 29, 2008|
|DEPAKOTE CP||Abbott||divalproex sodium||4,988,731||Jul 29, 2008|
|DEPAKOTE CP||Abbott||divalproex sodium||5,212,326||Jul 29, 2008|
|DEPAKOTE ER||Abbott||divalproex sodium||4,988,731||Jul 29, 2008|
|DEPAKOTE ER||Abbott||divalproex sodium||5,212,326||Jul 29, 2008|
|GLUCOTROL XL||Pfizer||glipizide||5,545,413||Jul 2, 2008|
|HIVID||Roche||zalcitabine||5,028,595||Jul 2, 2008|
|RESTORIL||Tyco Hlthcare||temazepam||5,030,632||Jul 9, 2008|
|RESTORIL||Tyco Hlthcare||temazepam||5,326,758||Jul 9, 2008|
|UVADEX||Therakos||methoxsalen||5,036,102||Jul 30, 2008|
|VEXOL||Alcon||rimexolone||4,686,214||Jul 22, 2008|
Courtesy of DrugPatentWatch.com